Think it's too late to take control of your money? Think again. Here's 7 simple lessons you can apply to your life today.
Now and then, along comes a book that changes the way you think. For me, The Richest Man in Babylon, was one such book. So you that are inspired into action, this podcast/video/blog edition will share the biggest lessons that I learnt from this classic finance book.
You'll be surprised at how approachable the author's ideas are; financial common sense divided into 7 simple parts. From my experience, I found that the key to applying the principles was to keep it simple, so that I could be consistent. Significant financial change begins with simple steps. Let's dive in!
1. Pay yourself first - “Start thy purse to fattening”
- Learn to see the value of your work, and place a priority on paying yourself first.
- Create a simple system to allocate where your money gets spent. Here's a quick look at how I aim to divide it:
- 10% = Pay yourself first.
- 10% = Pay debts (start with most small, expensive, high interest debts first).
- 10% = Future savings.
- 10% = Generosity (charity, church tithe, non-profit organisations etc.)
- 60% = Living expenses, including mortgage.
2. Live within your means - “Control thy expenditures”
- Don't spend more than you make.
- Either spend less, or earn more.
- Be clear on the difference between a desire and an expense (especially for those of us in business).
- Resist the habit of spending more as we earn more. Just because our income might increase, doesn't mean our spending should.
3. Make money work for you - “Make thy gold multiply”
- Understand compound interest, and how you can benefit from it.
- Bank interest: Consider opening an online high interest account, that you can't access with a ATM card.
- Investments: Only invest after you have saved a reserve of 6-8 months worth of living expenses.
- There are many investment vehicles, choose the one you understand the most (I experimented with Forex, but pursued other things instead).
4. Safeguard your wealth - “Guard thy treasures from loss”
- Have a variety of insurance policies, income protections etc..
- Create financial reserves (emergency funds).
- Avoid investments that sound 'too good to be true' (they probably are).
- Remember "it costs nothing to ask a good friend for counsel".
- Seek advice from people who are experts in their particular field, people who have actually experienced what you’re attempting.
5. Own your own home - “Make of they dwelling a profitable investment”
- Where possible, own your home.
- Be smart about your biggest expense/investment, if it isn’t home ownership.
- Buy a home that is below the maximum you can afford, yet one that you can still enjoy.
6. Have a retirement plan - “Insure a future income”
- It is a reality that all of us will become old, and eventually stop work (eek!!).
- Plan for the day that you do stop working.
- Look at ways to maximise the earning potential of your superannuation (Aus), 401k (USA) or similar.
- Make sure your income will continue work without you having to physically work.
- Consider those who are financially dependent on you.
- Create safety through investment diversity.
7. Invest in your personal development - “Increase thy ability to earn”
- Strive to become wiser and more knowledgeable.
- We live in a very exciting time: the Information and Innovation Age.
- Knowledge is literally at your fingertips, thanks to the Internet.
- This is my approach to running my business: LEARN > EARN > GET > GIVE.
Bonus tips:
- Our ability to handle money successfully, will influence whether our dreams and desires are realised.
- “It costs nothing to ask wise advice from a good friend.”
- Saving money is important, but so is fulfilment. Learnt to enjoy life, without feeling the overbearing pressure to save.
- Paying your debts is a sign that you have respect for yourself (aaw snap!).
- My favourite tip: “The soul of a free man looks at the world as a series of problems to be solved. Meanwhile, the soul of a slave whines, “What can I do?””
Your turn:
- What 2 simple steps can you take, to create sustainable, significant financial change?
- Have you thought to yourself, "it's too late to improve my financial position"? If so, what are 2 attitudes about money, you could change this week?
Disclaimer: This blog/podcast/video book review does not contain financial advice.
